DOL Strikes Global Crossing Deal

July 20, 2004 (PLANSPONSOR.com) - Another 401(k)
company stock suit drew to a close today, as the Labor
Department recovered $79 million for workers and retirees
from former executives and directors of Global Crossing
Ltd.

Under the settlement, which still requires court
approval, Global Crossing founder and former Chairman Gary
Winnick will pay $25 million from an irrevocable escrow
account, and former officers and directors including
Winnick, former Chief Executive Thomas Casey, and
ex-members of the Employee Benefits Committee will pay an
additional $54 million from insurance policies.

The Global Crossing Retirement Savings Plan lost tens of
millions of dollars as a result of its extensive stock
holdings in Global Crossing stock, which lost virtually all
of its value, according to the Department of Labor.
The settlement covers the two former inside directors of
Global Crossing, Thomas Casey (former Chief Executive
Officer) and Gary Winnick (former Chairman of the Board),
as well as the three former members of the Employee
Benefits Committee, Dan J. Cohrs, Joseph Perrone, and John
Comparin. Under the terms of the settlement, the
former officers and directors are prohibited from acting as
fiduciaries to ERISA-covered benefit plans.

“I am pleased that the Global Crossing workers, retirees
and their families will receive a significant financial
recovery,” said U.S. Secretary of Labor Elaine L. Chao.
“Fiduciaries have a serious and significant responsibility
to protect the long term pension security of their workers.
I hope this lesson gets through to others.”

Background

Similar to the 401(k) plan at Enron in which
participants had to take their company matching
contribution in company stock, Global Crossing workers in
March 2002 claimed they were still accumulating Global
stock at a time when the company was coping with financial
problems and the shares’ value was plummeting.
The suit, filed in March 2002, alleged that company
officials breached their fiduciary duty by not properly
disclosing the firm’s true financial problems and by not
warning participants about the potential risks of
overaccumulating company stock (see
Global Crossing Workers File Company Stock Suit
).
Another employee suit was filed in February of that year
(see
Participants Bring Another Company Stock Complaint
).

In March, Global Crossing settled a related private
lawsuit with shareholders, workers and employees for $325
million, including $55 million from Winnick (See
Global Crossing Execs Come to Terms with Ohio-led Suit
).
The Department of Labor’s agreement with the former Global
Crossing directors and officers was part of the prior $325
million private settlement, a settlement that contained a
clause that allowed plaintiffs to back out of the agreement
if the Department of Labor’s investigation was not resolved
to their satisfaction.